Construction Bonds Aren’t Used For All Jobs

Most surety companies in the U.S. won’t provide construction surety bonds for certains types of jobs, including those listed below:

  • Overseas projects
  • Jobs on Indian reservations
  • Multiyear construction jobs (three years+)
  • Private home remodeling projects (unless being paid for by the government)

These types of jobs are considered high-risk.  Surety bonds for public construction jobs, such as performance bonds, are are an insurance policy written by the surety company guaranteeing that you’ll complete a job according to the contract.

If you breach the contract and don’t complete the job or complete it outside of the terms of the contract, a claim can be filed.  The surety company will pay the claim and then subsequently come to you for reimbursement. The bottom line is that bonds for construction projects protect taxpayer’s dollars.

Overseas projects or Indian reservation construction jobs, are considered risky since surety bonds require work to be done according to the contract.  Contract laws are different in other countries and regions, and most surety companies are not familiar enough with them to write bonds in these regions.

Also, multiyear construction contracts that last for three or more years are considered high risk for surety companies, since they will involve numerous unknowns in the future.   A surety company is unable to predict whether a contractor will still qualify to perform the work that far in the future.

For example, if a contractor defaults on another project while also working on a three year job, the default could cause the contractor to go bankrupt, which means the contractor wouldn’t be able to complete any other jobs.  

Construction bonds for private home remodeling projects are unavailable.  As mentioned above, surety bonds for construction jobs protect the public and are used for public projects.  They are not for private use. The exception is a home remodeling job being funded by a government entity.

Home remodeling jobs that are being paid for by the government can be guaranteed by surety bonds.  For example, homes damaged by hurricanes or tornadoes are sometimes repaired or rebuilt with government funding.  These jobs may use bonded contractors.

Let Surety Bonds Inc. find the right Bid Bond, Performance Bond, Payment Bond, or License Bond for you and help protect your business.